Mortgage banker says his business has never been better.

Mr. Mozilo, 51, incoming president of the Mortgage Bankers Association of America, also says it's the best year for the mortgage business in 37 years.

The Bronx native started in the business at age 14 as a messenger. By the time he graduated from college, he had done everything at the mortgage company he worked for part time. In 1968, he founded his own mortgage company, Countrywide Funding Corp., now based in Pasadena, Calif. He told Washington bureau chief Jim McTague and reporter Debra Cope that business would be better if commercial banks made more short-term credit available.

American Banker: How's business? Angelo Mozilo: We're doing twice the business we've ever done. In September, we'll do $1 billion in financing. A billion dollars! So business is coming out of the woodwork.

AB: But home sales are flat. AM: Not many buyers are coming out. But when they do, there are very few options where to get fixed-rate financing, where to get quality service. You never see an S&L [person] with a beeper attached to his navel going to a house at midnight to take a loan application.

AB: Who are you lending to? AM: Our average loan is $135,000. The most activity is always in California. That represents between 30% and 35% of total real estate transactions.

Right now if you ask about emerging areas of the country, there's no question that it is Texas. Texas is coming back very strong.

AB: What products are hot? AM: On the conforming mortgages, they sem to be coming in for the 30-year with seven years fixed. That seems to give them comfort. [The loan] has a guaranteed conversion at a specific rate. They get one increase and that's it.

AB: Are people refinancing to pull equity out? AM: No. Mostly, to get out of a variable rate. Most lenders have become very strict not only in their underwriting, but in their down payment requirements for these refinancings. Because really, up to an 80% loan, I probably have bought your house. You're probably setting me up.

AB: Are you are worried about the future of the economy? AM: I'm always worried about that.

AB: But are you more worried than you have been in 37 years? AM: No. But I'm worried more than I was two or three years ago. Because you don't know when this is going to end. Where is the bottom? You hear all these predictions. I see bank mergers going on and people losing jobs. This is continuous.

AB: Is your rate of defaults up? AM: Yes. The trend is certainly up. Someone loses a job or ther family breaks up. These are the two most common rasons.

AB: Are you working out more troubled loans? AM: The whole trned in this country -- and absolutely the right trend -- is to forbear. We know as a lender it doesn't make any economic sense to get the house back. It's a catastrophe for everyone. For us. For Fannie or Freddie. Plus, you're taking a family with kids and throwing them in the street.

AB: What can you do? AM: We try everything, including making some payments ourselves.

AB: Will next year be better? AM: It's hard to tell. It has the makings of it in terms of our ability to get credit lines, which is restricting the people in our industry. They haven't been able to get sufficient bank lines to close their loans.

AB: What do you mean? AM: We're putting loans in those lines for an average of 35 days until we sell them. We make a loan to you. IT takes a while to perfect it and get it securitized. It takes 21 to 45 days, so we need a temporary credit line. We have $1 billion of loans all the time.

When I started Countrywide in 1968, I walked across Park Avenue to Chase Manhattan Bank and said I need a line of credit, and they gave me my first lien of credit. It represented 40 times my equity. That was traditional in mortgage banking. Mortgage banks are highly leveraged operations. That's how you make your money. We work on pennies, and the only way you do that is to leverage. Our leverge today is less than five to one.

The banks have squeezed it down. There is no speculation on these loans. They're going to be out of there in 30 days. And they [the banks] have it in real estate. They have a mentality that mortgage financing is part of real estate, and they are restricting these lines.

If our industry was able to transform the world tomorrow, and get adequate credit, we'd have no S&Ls left in this country. We would absolutely steamroll them. There would be nothing left of them. We're more efficient. We're better at what we do.

AB: It sounds like you are a real fan of the S&L industry. AM: I hate them. They are rotten people. I don't mean all of them. Jim Montgomery at Great Western does a great job. Herb Sandler [World Savigns and Loan] is very focused. On balance, these guys went gaga with taxpayer money.

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